September 19, 2012

Willard “Ross” Lanham, 58, learned yesterday that embezzling millions of dollars in funds meant to bring Internet access to kids is not only a despicable thing to do, but it will also earn you more than three years in prison.

A Manhattan federal court judge sentenced Lanham to 37 months in jail for orchestrating an embezzlement scheme that netted him $1.7 million from the New York City Department of Education.

Lanham served as a consultant for the DOE from 2002 to 2008 on three projects designed to upgrade the technological infrastructure in city public schools. It was through the Power Connect project, which the DOE launched to bring Internet access to city public schools, that Lanham devised a scheme to skim the city out of the large sum of money.

Lanham set up his own — unauthorized and unnecessary — consulting company, hired out its consultants to contractors and subcontractors working on the Power Connect project, and had these companies bill one another (and ultimately the DOE) at high rates for the shadow company’s consultant “services.” This web of deceit made him millions in profits over the course of his tenure as the Power Connect point man.

“The Department of Education entrusted [Lanham] with the vitally important task of helping young students get connected to the Internet — thereby connecting them to the world around them and the infinite resources that can be found online,” Preet Bharara, U.S. Attorney for the Southern District of New York, said in a statement obtained by Voice. “Instead, Lanham chose to steal precious dollars from DOE to help underwrite his lifestyle, and he will now pay for his crimes.”

This lifestyle included the purchase of a large plot of land in East Northport — where he built high-end homes and amassed a collection of luxury cars worth an estimated $600,000 (the collection included a Lexus, Corvette, Porsche, Cadillac Escalade, and a Mercedes, according to the investigator’s report).

You might think that the $200,000/year salary Lanham received from the DOE, which was part of the roughly $1.4 million in total pay for his work with the department, would’ve been enough. That, apparently, is not the case.

Lanham was hired in 2002 by a consultant company the DOE hired to oversee its entire technology upgrade initiative. Through a complex billing process — between Lanham, the two main contractors for the project, Verizon and IBM, and numerous subcontractors — Lanham was able to skim millions from the DOE.

According to court documents, Lanham’s scam was pretty elaborate — he set up his own consulting company, Lanham Enterprises, of which the DOE had no knowledge. In one such scenario, Lanham told one of the subcontractors to hire two consultants for the work they’d be doing on Project Connect, pay them, and then bill Lanhman Enterprises for reimbursement for a rate of $70/hour and $30/hour, respectively. This is in spite of the fact that the two consultants didn’t provide the subcontractor with any direct services — and really were just pawns of Lanham’s.

Lanham then instructed a different subcontractor to pay the same two consultants $187.50/hour and $125/hour, respectively. The subcontractor paid the consultants, but unlike the other subcontractor, it billed one of the main contractors instead of Lanham Enterprises. The main contractor then billed the DOE at rates up to 15 percent higher than what the subcontractor normally billed.

Thus Lanham was able to profit from the large difference between what Lanham Enterprises had to pay in reimbursements and what the second subcontractor paid the two consultants. When the main contractor grew suspicious of the payment system, Lanham assured the company that the DOE had authorized the billing process.

In all, from 2002 to 2008, the two consultants made $3.2 million dollars from the scheme —

much of that went to Lanham. Lanham perpetrated similar forms of his scheme during his time working on the project. He eventually added more consultants — including his brother — and changed how and in what way the subcontractors and contractors passed through the unauthorized payments.

In calculating the sum of these unauthorized profits, Lanham Enterprises made $5.3 million, and only paid out $1.7 million. Yesterday, the court ordered Lanham to forfeit his more than $1.7 million in salary earnings and pay back more than $1.7 million dollars to the DOE.